Michigan retailers are approaching the holiday shopping season with optimism and expectations for higher online sales, despite reporting lower sales for last month and new state restrictions from the COVID-19 pandemic.
A monthly retail index compiled by the Michigan Retailers Association and the Federal Reserve Bank of Chicago’s Detroit branch registered a 52.4 for October, a decrease from the 63.7 for September.
The lower monthly index came as nearly half of responding Michigan retailers reported higher sales in October from the prior month, 39 percent reported a sales decline, and 13 percent reported no change.
Looking ahead, 55 percent of retailers answering the Michigan Retailers Association’s latest monthly survey expect sales to grow through January over the same period a year ago, and 37 percent expect a sales decline. The remaining 18 percent expect no change from last year.
“We’re seeing sales rise nationwide as the holidays approach, but with another statewide order restricting in-person dining and entertainment venues, Michigan business owners face more hardships,” Bill Hallan, president and CEO of the Michigan Retailers Association, said in a statement.
The group is also urging consumers to shop local. The holiday “Shop 3 Challenge” promotion is in response to the toll the pandemic and resulting restrictions have taken this year on retailers, which are presently operating under a three-week state order that runs through Dec. 8 and limits their capacity to 30 percent.
As outlooks forecast large increases in online sales and reduced in-store sales, the Michigan Retailers Association encourages consumers to shop at three or more local retailers this year and to check whether they sell online or offer curbside pickup.
“Keeping local businesses alive is critical to Michigan’s economy. Of all the years to keep your dollars in Michigan, this is the year to do it,” Hallan said. “Many of these business owners are barely making ends meet. They need your support now more than ever.”
The city of Grand Rapids also launched a campaign on Tuesday meant to showcase local businesses during the holiday season. The effort is part of the Michigan Economic Development Corp.’s Pure Michigan Business Connect Program that seeks to connect corporate buyers with small businesses.
Buying patterns shifting
Nationwide, PNC Bank economists predict holiday sales will grow 6 percent this year over 2019, with all of the increase coming primarily from online sales. The pandemic comes as online sales increasingly cut into business for brick-and-mortar retailers, according to PNC.
PNC projects online sales during the holiday season to grow 27 percent this year from last year, while in-store sales nationwide declined 6 percent. The further spread of the coronavirus, rising fatality rates and new restrictions on retailers could cause already fragile consumer confidence to “plunge” and “further depress” in-store sales, according to PNC’s outlook.
The PNC report notes that “it may appear a bit incongruous that holiday sales would increase 6 percent when the unemployment rate is elevated and coronavirus cases are at record highs and rising.”
“But with the pandemic consumers have shifted their consumption toward goods and away from services. With people less willing to be in crowds, spending on services like travel, entertainment and dining out has fallen,” PNC economists wrote in their report on holiday sales. “At the same time people are spending more on at-home goods such as food, building materials, electronics, and entertainment supplies. That trend is boosting online holiday purchases.”
Higher unemployment rates, the expiration of extended unemployment benefits at the end of the year, and the lack of an agreement yet on additional federal economic stimulus could turn consumers more cautious, PNC said.
Or consumers may go the other way with the recent news of progress on vaccine developments and stock market gains. Job losses have disproportionately affected higher income households at lesser rates, PNC economists wrote.
“Consumer psychology is much more of a wildcard than usual this year,” PNC’s holiday sales outlook states. “Gift buyers may decide to splurge after a year of deprivation, or to make up for an inability to travel and see family in-person. On the other hand, they may be much more concerned about the future and less willing to spend.”
The National Retail Federation forecasts holiday sales nationwide during November and December to increase 3.6 to 5.2 percent from last year, or $755.3 billion to $766.7 billion.
Of that total, online and other non-store sales will increase 20 to 30 percent alone, or $202.5 billion to $218.4 billion, according to the National Retail Federation outlook. E-commerce sales grew 36.7 percent in the third quarter from a year earlier.